Abstract

http://ssrn.com/abstract=2374945
 
 

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When Does Tax Avoidance Result in Tax Uncertainty?


Scott Dyreng


Duke University

Michelle Hanlon


Massachusetts Institute of Technology (MIT) - Sloan School of Management

Edward L. Maydew


University of North Carolina at Chapel Hill

Augut 10, 2016


Abstract:     
We investigate the relation between tax avoidance and tax uncertainty, where tax uncertainty is the possibility of losing a claimed tax benefit upon challenge by a tax authority. On average, we find that tax avoiders, i.e., firms with relatively low cash tax rates, do bear significantly greater tax uncertainty than firms that have higher cash tax rates. However, we find that this relation is driven by firms with tax haven subsidiaries and high levels of R&D expense, proxies for intangible-related transfer pricing strategies. Thus, contrary to expectations, general tax avoidance (i.e., unrelated to tax havens) does not explain variation in tax uncertainty. The findings have implications for several puzzling results in the literature but also raise new questions.

Number of Pages in PDF File: 48

Keywords: tax avoidance, tax uncertainty

JEL Classification: M41, H25


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Date posted: January 6, 2014  

Suggested Citation

Dyreng, Scott and Hanlon, Michelle and Maydew, Edward L., When Does Tax Avoidance Result in Tax Uncertainty? (Augut 10, 2016). Available at SSRN: http://ssrn.com/abstract=2374945 or http://dx.doi.org/10.2139/ssrn.2374945

Contact Information

Scott Dyreng
Duke University ( email )
Box 90120, Fuqua School of Business
Durham, NC 27708-0120
United States
Michelle Hanlon
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
100 Main Street
E62-668
Cambridge, MA 02142
United States
617-253-9849 (Phone)
Edward L. Maydew (Contact Author)
University of North Carolina at Chapel Hill ( email )
McColl Building
Chapel Hill, NC 27599-3490
United States
919-843-9356 (Phone)
HOME PAGE: http://www.kenan-flagler.unc.edu/faculty/directory/accounting/edward-maydew

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